The Reserve Bank of India (RBI) and the Financial Intelligence Unit-India (FIU-IND) have initiated scrutiny into offshore cryptocurrency payment cards operating via Visa and Mastercard networks, including international fintech providers such as RedotPay. Authorities are examining whether these offshore prepaid cards violate domestic payment authorization rules, anti-money laundering (AML) frameworks, and the Foreign Exchange Management Act (FEMA), 1999, news reports said.
These crypto cards allow Indian residents to fund overseas digital wallets with cryptocurrencies, including dollar-pegged stablecoins, and spend the balances locally. During a purchase or ATM withdrawal, the offshore issuer converts the digital assets into fiat currency, routing the payment through existing card networks so that Indian merchants receive local rupees. Consequently, crypto-funded transactions mirror standard debit card activity while bypassing the domestic banking system. Several domestic users have reported card operational outages and restricted website access in recent days.
The regulatory action follows investigations by Bengaluru-based Digital South Trust, which shared transaction data with authorities after successfully testing a virtual RedotPay card locally. Trust founder Sudhakar Lakshmanaraja and legal experts highlighted that minimal identity-verification (KYC) processes on some offshore cards undermine transaction monitoring. Legal analysts noted that automatic off-market conversions to rupees may circumvent local payment processor authorization rules, while regulatory bodies could leverage blockchain analytics to identify token origin and ownership.
This crackdown aligns with India’s broader push to enforce compliance among foreign Virtual Digital Asset (VDA) service providers. FIU-IND previously issued non-compliance notices to 15 offshore entities, requiring them to register locally, maintain recordkeeping, and fulfill mandatory reporting obligations. The investigation also touches on tax compliance, given India’s 30% tax on gains from VDA transfers. While global stablecoin-linked card usage continues to surge, Indian regulators remain focused on evaluating whether these international payment channels operate within domestic financial legal boundaries.
